Correlation Between HYDROFARM HLD and Chesapeake Utilities
Can any of the company-specific risk be diversified away by investing in both HYDROFARM HLD and Chesapeake Utilities at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining HYDROFARM HLD and Chesapeake Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HYDROFARM HLD GRP and Chesapeake Utilities, you can compare the effects of market volatilities on HYDROFARM HLD and Chesapeake Utilities and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in HYDROFARM HLD with a short position of Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of HYDROFARM HLD and Chesapeake Utilities.
Diversification Opportunities for HYDROFARM HLD and Chesapeake Utilities
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between HYDROFARM and Chesapeake is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and HYDROFARM HLD is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on HYDROFARM HLD GRP are associated (or correlated) with Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and Chesapeake Utilities go up and down completely randomly.
Pair Corralation between HYDROFARM HLD and Chesapeake Utilities
Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to under-perform the Chesapeake Utilities. In addition to that, HYDROFARM HLD is 2.92 times more volatile than Chesapeake Utilities. It trades about -0.01 of its total potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.16 per unit of volatility. If you would invest 9,783 in Chesapeake Utilities on August 28, 2024 and sell it today you would earn a total of 2,817 from holding Chesapeake Utilities or generate 28.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HYDROFARM HLD GRP vs. Chesapeake Utilities
Performance |
| Timeline |
| HYDROFARM HLD GRP |
| Chesapeake Utilities |
HYDROFARM HLD and Chesapeake Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HYDROFARM HLD and Chesapeake Utilities
The main advantage of trading using opposite HYDROFARM HLD and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HYDROFARM HLD position performs unexpectedly, Chesapeake Utilities can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Chesapeake Utilities will offset losses from the drop in Chesapeake Utilities' long position.| HYDROFARM HLD vs. Superior Plus Corp | HYDROFARM HLD vs. NMI Holdings | HYDROFARM HLD vs. Origin Agritech | HYDROFARM HLD vs. SIVERS SEMICONDUCTORS AB |
| Chesapeake Utilities vs. Playtech plc | Chesapeake Utilities vs. Lion Biotechnologies | Chesapeake Utilities vs. Cal Maine Foods | Chesapeake Utilities vs. AUSNUTRIA DAIRY |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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